India’s financial intuitions that offer home loans consider the applicants’ income as one of the key eligibility factors while determining the maximum loan they can approve. Read on to know how much loan you can borrow based on the salary you draw.
Often the lenders do not approve the full loan amount that the borrowers apply for because they don’t meet the lenders’ minimum income requirements. Having a regular income source is paramount to prove to the lender that you have sufficient financial resources to repay the amount that you borrow. Also, having an adequate income is critical to secure the amount that you want to borrow.
Generally, the lenders determine the maximum amount they can lend based on the salary/income. The common formula used by the lender to determine the loan eligibility is 60 x the salary you draw.
This means irrespective of the salary you get, the maximum loan you can avail of is 60 times the salary amount. Let us better understand how much loan you can get based on your salary with the following table:
|Your salary||Maximum loan amount you can avail|
|Rs. 25,000||Rs. 15,00,000|
|Rs. 30,000||Rs. 18,00,000|
|Rs. 40,000||Rs. 24,00,000|
|Rs. 50,000||Rs. 30,00,000|
|Rs. 60,000||Rs. 36,00,000|
From the above table, it is evident that the higher the income, the higher your home loan eligibility. Before you initiate the home loan application process, you should use the home loan eligibility calculator to check the maximum amount you can avail.
The calculator is an easy-to-use online tool that allows you to know the exact amount you can borrow based on your income, outstanding dues (if any), loan term, other sources of income, etc.
Now that you know how much loan you can get based on your income,it would help you understand how your salary affects home loan eligibility.
- Rate of interest
The home loan interest rate is one of the important things that directly affect affordability. Generally, the lenders decide the interest rate based on the applicants’ credit profile. For example, if you are a salaried employee with a fixed income source, you may get a loan at a lower interest rate than an applicant who is a small business owner. This is because there is no guarantee of income in business, which increases the risk of default or delay in the EMI payment.
- Faster processing of loan
Generally, the loan processing time for salaried employees is much lesser than those who are self-employed. This is because the financial details, including income, employment history, etc. required by the lender, are readily available through bank account statements, ITR (income tax returns) salary statements, Form 16. Additionally, if you have recently received an appraisal or annual bonus or due to receive it soon, the lender will be assured of your ability to repay the loan without default and process the loan faster.
- Long loan tenure
In India, most lenders provide home loans for a maximum duration of 30 years. But, your income may indirectly affect the loan tenure. The lenders usually consider the repayment capacity of the applicants to determine the loan term. If your salary is high, the lender may offer the credit for a longer duration. Longer-term means the EMI will be more affordable, and the repayment becomes easier. But, most lenders want the loan to be repaid fully before you attain the retirement age.
Now that you know salary affects your home loan eligibility make sure that you apply for the right amount to avoid your application’s rejection.